Scaling is both an opportunity and a risk for businesses. It isn’t for everybody and you may prefer to stay small and focus on improving yout profitability instead, in which case many of the same advice can apply.
Rapid growth can often mean increased costs ahead of receiving the additional cash and this can cause a cashflow bottleneck. We believe in sustainable scaling so here are a few tips:
- Have a cashflow first approach to scaling
- Forecast your cash requirements and the same time as you forecast your growth
- Review your payment terms for both sales and purchases
- Tighten up your credit control processes. Chase early, and chase hard. If a customer isn’t paying then you will lose whatever costs you have incurred.
- Review your terms of business to ensure that you are invoicing promptly or even getting paid in advance
- Arrange the right type of debt. Lower interest secured debt may be cheaper than short term credit card borrowing
- Consider taking on more equity funding but be aware that this will dilute your ownership and control of the business
- Track your cash balances and forecast daily if necessary
- Keep an eye on your run rate ie the number of days of overheads your current cash balance will cover (Even my son did this when first setting up as a freelancer!)
- Tighten inventory management, work in progress, and costs that aren’t generating a decent return on investment.
Minerva Accountants can help with all of this by reviewing your current processes, preparing forecasts, arranging finance, and recommending useful software. Even accountants need to pay attention to their cashflow when scaling.